Morning Briefing: Regional Currencies under Pressure

The recent spate of disappointing central European economic indicators, which was highlighted by worse-than-expected Polish data Friday, will add to pressure on regional currencies in the new week.

The zloty lost over 1% against the euro Friday after Polish data releases for December showed employment fell both on the month and annually in December, while industrial production plummeted 10.6% annually. Additionally, the country posted a November trade deficit, while the market had expected a surplus.

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The forint and koruna also lost ground Friday, though the Hungarian and Czech central banks will welcome such news as both have been trying to talk down their currencies to boost exports.

Separately, data Monday showed that Hungary’s grain crop declined sharply last year due to an extreme drought.

A 20% annual drop in grain harvests was seen elsewhere in central and eastern Europe last year, including in the Czech Republic and especially in Ukraine, the breadbasket of the region.

In addition to drought last year, unusually cold weather at the start of 2012 led to a fall in grain yields, the United Nation’s Food and Agriculture Organization said.

OTHER NEWS

POLAND: The International Monetary Fund on Friday approved a new two-year credit line worth $33.8 billion for Poland, essentially extending the precautionary facility that has been in place since 2009.

The credit line is without the normal conditions most IMF loans require because Poland’s economic policy is seen as relatively strong.

CZECH REPUBLIC: The Czech government Friday issued an environmental impact assessment giving non-binding approval to the planned expansion of the Temelin nuclear power station, a crucial step towards launching the $10 billion project.

The assessment lists 90 conditions which CEZ AS–the power company that runs the plant–must undertake to ensure the nuclear operation remains safe for the environment, the environment ministry said.

SLOVAKIA: Slovakia’s Premier, Robert Fico, tells Austrian newspaper Der Standard that Greece has to fulfill its obligations or leave the euro zone, according to the newspaper. He asked rhetorically why a country such as Slovakia, where the average wage is EUR500 to EUR600 a month and a retiree averages EUR300 a month, pays for Greece “if our people see that the Greeks can’t even fulfill their most basic obligations?”

He also told the newspaper that if his government were to sell its remaining small stakes in various privatized enterprises, it would use the proceeds to buy something back, which he left unspecified.

He defended recent tax increases, calling them “moderate” and necessary to finance the social net, according to the newspaper.

ROMANIA: Romania’s Transport Ministry Friday said has it has resumed listing proceedings for eight companies in its portfolio, including Constanta port in the Black Sea and the Henri Coanda airport in Bucharest, news agency Mediafax reports.

The authorities plan to sell minority stakes of 5% in each of the eight companies, Transport Minister Relu Fenechiu told Mediafax.

About Emerging Europe

Emerging Europe Real Time provides sharp analysis and insight into what’s making news in Central and Eastern Europe. Drawing on the expertise of our reporters in the Czech Republic, Hungary, Poland, Russia and Turkey, the site provides an inside track on economics, politics and business in this emerging part of the European continent.